Your
U.S. Congress participates in and supports one of THE most fraudulent
taxpayer abuse schemes ever concocted within the Federal Government.
It’s time the administration put its foot down rather than allow
millions of unlawful immigrants to step onto American soil—while
soaking billions out of the U.S. Treasury.

Since
the Earned Income Tax Credit (EITC) became part of the income tax code
in 1975, it has quietly become the largest cash transfer program in
the United States. At a cost of more than $44 billion per year, EITC
spending dwarfs that of the traditional welfare program—Temporary
Assistance for Needy Families (TANF)—and nd food stamps combined.
More than 23 million households currently receive the credit.

Edwin
Rubenstein exposed one of the most dramatic tax frauds ever on the American
taxpayer: “Defrauding the American taxpayer,” Volume 19,
Number 3, spring 2009, www.thesocialcontract.com, “The Earned
Income Tax Credit and Illegal Immigration - A Study in Fraud, Abuse,
and Liberal Activism.”

“From
1985 to 2006, EITC payments grew from $2.1 billion to $44.4 billion,
or by an eye-popping 2,014 percent,” Rubenstein said. “Total
federal income tax revenues rose by 217 percent over that same period.
Similarly, the number of returns claiming the EITC rose from 6.4 million
to 23 million—an increase of 255 percent—over a perperiod
when the total number of federal income tax returns increased by 36
percent.

“More
than one in four immigrant households received the EITC in 2000—nearly
twice the 13.2 percent rate of houuseholds headed by Native Americans.
And because immigrant households are larger via higher fertility, their
EITC payments are larger than those received by native households.

“Bottom
line: Immigrants accounted for about 13 percent of the U.S. population
in 2008 but receive an estimated 26 percent of EITC benefits—about
$12 billion.”

The
most distressing aspect of EITC stems from unlawful immigrants tapping
into the program on a massive scale. For example, in Greeley, Colorado
this year, district attorney Buck Young raided a tax filing agency to
find over 1,000 fraudulent returns by unlawful workers. While they paid
little or nothing in taxes, they received hundreds of thousands in bogus
returns. That same scam multiplies all over the country.

“Tax
relief" goes to people who never paid a cent in taxes, and may
have already defrauded the government of huge sums each year. "EITC
scams are common, well-organized, and massive," Rubenstein writes
in the report. EITC ranks second out of 57 government programs in fraudulent
payments.

“But
enthusiasm for the credit has blinded policy makers to its problems.
The EITC program is dominated by fraud. Year after year about one-third
of all EITC returns are based on illegal multiple returns, phony Social
Security numbers, or claims of non-existent children or spouses. A disproportionate
share of illegal alien households receives the benefit.

“Washington’s
love affair with the EITC has allowed the minimum wage to decline in
real value. Native workers have suffered as a result. So have labor
unions. In effect, the EITC subsidizes employers who hire low-wage immigrants
and reject equally qualified natives. No one should be surprised; therefore,
that Wal-mart, the U.S. Chamber of Commerce, and most liberal activist
groups are major EITC supporters.

“For
most poor families, the tax credit check is the largest single sum of
money they will receive during the year. Most receive it after filing
income taxes. But some need the money immediately, and they can get
it—for a price. A niche financial sector thrives by leending EITC
recipients immediate cash in return for a hefty chunk of their credit
check. The cost to the poor of these so-called Refund Anticipation Loans
(RALs) has been estimated at 6 percent of the entire EITC program.

“Widespread
availability of high-interest RALs made poor borrowers easy marks for
sub-prime mortgage hucksters. The resulting defaults have pushed the
entire economy to the brink of collapse. While the sub-prime story is
well known, few are aware of the EITC’s role in introducing the
poor to the culture of debt.”

Has
the EITC lived up to its hype? In answering this, consider the following:

The
EITC originated as an anti-poverty program; the number of the returns
claiming EITC benefits rose 25 times faster than the poverty population
over the past two decades.

EITC
benefits rise sharply with parenthood; poverty rates for families with
children have risen faster than those for childless families since the
credit was created.

The
EITC is the most illegal-immigrant friendly of poverty programs; illegal
immigrants constitute a far larger share of the poverty population now.

Implication:
The EITC is a textbook case of unintended consequences. Our economic
meltdown may be among them.

“The
current federal EITC provides large benefits to families with children,
mostly single mothers, and minimal benefits to singles, even though
declining wages have affected all low-income workers. These disparities
create disincentives to work in the formal labor market and for poor
men and women to marry, cohabitate, and co-parent,” said Rubenstein.
“President Obama’s stimulus package increased EITC payments
by $600 for poor families with three or more children, while leaving
the program’s perverse disincentives intact. This will merely
exacerbate the credit’s bias against work and marriage.”

"The
Earned Income Tax Credit (EITC) is the largest anti-poverty program
in the United States - and the most illegal-immigrant friendly,"
explains Edwin Rubenstein, author of the new report. "In 2007,
more than 23 million households received more than $47 billion in the
EITC payments."

Finally,
“The EITC is the most accessible of the major entitlement programs
and used by more people than food stamps and welfare (TANF)* combined.
A related tax credit, the Additional Child Tax Credit (ACTC) is available
to illegal immigrants even if they do not have a valid Social Security
number.”

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Ed
Rubenstein, Financial analyst and economist, who is President of ESR
Research; formerly he was with the W. R. Grace Company, the Manhattan
Institute and the Hudson Institute.

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